The response of U.S. natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production

Chiou-Wei, Song-Zan; Linn, Scott C.; Zhu, Zhen

doi:10.1016/j.jimonfin.2013.08.009

Cited by 40 publications

(22 citation statements)

References 25 publications

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“…This result confirms with the finding of Mu [ 5 ] for natural gas futures. Expected inventory surprises significantly and negatively impacts the far-month natural gas futures returns, confirming the finding in [ 10 , 21 ]. However, the expected inventory surprises do not affect heating oil futures returns.…”

Section: Discussionsupporting

confidence: 84%

“…Chinn et al found that futures accurately predicted future spot prices, with the exception of 3-month natural gas futures. Chiou-Wei et al [ 10 ] identified empirical regularities between changes in futures prices and surprise changes in natural gas in storage. Chiou-Wei et al found an inverse relation between changes in futures prices and surprises in the change in natural gas in storage.…”

Section: Literature Reviewmentioning

confidence: 99%

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Effect of Temperature Shock and Inventory Surprises on Natural Gas and Heating Oil Futures Returns

Lin

2014

The Scientific World Journal

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The aim of this paper is to examine the impact of temperature shock on both near-month and far-month natural gas and heating oil futures returns by extending the weather and storage models of the previous study. Several notable findings from the empirical studies are presented. First, the expected temperature shock significantly and positively affects both the near-month and far-month natural gas and heating oil futures returns. Next, significant temperature shock has effect on both the conditional mean and volatility of natural gas and heating oil prices. The results indicate that expected inventory surprises significantly and negatively affects the far-month natural gas futures returns. Moreover, volatility of natural gas futures returns is higher on Thursdays and that of near-month heating oil futures returns is higher on Wednesdays than other days. Finally, it is found that storage announcement for natural gas significantly affects near-month and far-month natural gas futures returns. Furthermore, both natural gas and heating oil futures returns are affected more by the weighted average temperature reported by multiple weather reporting stations than that reported by a single weather reporting station.

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Section: Discussionsupporting

confidence: 84%

Section: Literature Reviewmentioning

confidence: 99%

Effect of Temperature Shock and Inventory Surprises on Natural Gas and Heating Oil Futures Returns

Lin

2014

The Scientific World Journal

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“…Evolved from a highly regulated market to a highly unregulated market, the natural gas futures market has proven to be one of the most volatile markets. Trading volumes in natural gas futures have skyrocketed in recent years with open interest in NYMEX growing at a compound annual rate of 13.5% between January 1998 and January 2012 (Chiou-Wei et al (2014)). Daily volume ranges from 60,000 to 100,000 contracts for the nearby-month futures and 20,000 to 60,000 contracts for the second nearby-month futures 1 .…”

Section: Introductionmentioning

confidence: 99%

Asymmetric impacts of fundamentals on the natural gas futures volatility: An augmented GARCH approach

Ergen

Rizvanoghlu

2016

Energy Economics

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“…Prices refer to natural gas delivered at the Henry Hub in Louisiana. The relevance of storage and jumps in natural gas price formation and futures term structure has previously been investigated in Chan et al (), Chiou Wei and Zhu (), Chiou‐Wei, Linn, and Zhu (), and Geman and Ohana ().…”

Section: Empirical Evaluationmentioning

confidence: 99%

Can limits‐to‐arbitrage from bounded storage improve commodity term‐structure modeling?

Kleppe

Øglend

2019

Journal of Futures Markets

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This paper develops and estimates a two‐factor competitive storage model for the purpose of pricing commodity futures. The empirical relevance of the model is evaluated for US natural gas and crude oil futures by comparing the pricing performance to reduced form models. Results suggest jump models, both reduced form and economic, improve modeling due to incorporating pricing discontinuities. Furthermore, the economic model precludes carry arbitrage, which appears relevant for pricing natural gas futures. For crude oil, the reduced form models produce superior pricing under nonstationary market conditions, and the economic model produces superior long‐dated futures pricing under stationarity.

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The response of U.S. natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production

Cited by 40 publications

References 25 publications

Effect of Temperature Shock and Inventory Surprises on Natural Gas and Heating Oil Futures Returns

Effect of Temperature Shock and Inventory Surprises on Natural Gas and Heating Oil Futures Returns

Asymmetric impacts of fundamentals on the natural gas futures volatility: An augmented GARCH approach

Can limits‐to‐arbitrage from bounded storage improve commodity term‐structure modeling?

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